S&P Calls Puerto Rico Debt Restructuring 'Inevitable'
Standard & Poor's Ratings Services said Monday that it's a nearly sure bet that Puerto Rico will default within six months.
"It appears to be inevitable," S&P said of a default, distressed exchange, or redemption of the debt, which is widely held by U.S. municipal bond funds.
Puerto Rico's Governor Alejandro García Padilla said on Saturday that that the commonwealth can't pay its roughly $72 billion in debt and will seek concessions from creditors.
Although the unincorporated U.S. territory says it will intends to pay short-term notes due June 30 and general fund-supported obligations on July 1, S&P said a debt restructuring is likely within six months.
Related Link: Trouble In Paradise: Puerto Rico's Mounting Debt Crisis
S&P cut its rating on Puerto Rico's general obligation bonds to "CCC minus" from "CCC plus." Also Monday, S&P cut Greece's deb rating to "CCC minus" from "CCC"
Ratings below BBB are regarded as a speculative grade of investment, or junk bond status.
A report released Monday by the Puerto Rico Government Development Bank identified a "fast deteriorating" cash flow position and projected a fiscal 2016
budget gap of $3.7 billion, rising to $6 billion by 2018 and higher in subsequent years.
S&P called the budget gaps "unmanageable" relative to fiscal 2015 estimated general fund revenue of only $9.6 billion.
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